What Happened

Disney reported Q4 earnings on November 7. Revenue slightly topped expectations, but EPS fell below estimates. This was notably different from their adjusted earnings, which came out at roughly twice what the earnings were based on generally accepted accounting principles (GAAP). This illustrates how important it is to make sure you know if you're looking at adjusted or GAAP earnings. On a very positive note, despite the proliferation of streaming services, including Disney's own which launches later in the month, Disney's media networks segment revenue increased significantly. This shows that even without its streaming service, its television business can still grow.

(Below is Investopedia's original earnings preview, published 11/1/19)

What to Look For

The Walt Disney Company (DIS) will launch its Disney+ streaming service in November, joining a growing field of competitors that includes stalwarts like Netflix (NFLX) and fellow newcomers to streaming like Apple (AAPL). Will the company be able to post gains to its "Media Networks" revenue, a key metric reflecting TV and cable channel revenue, amid increasing competition? Investors will find out when Disney reports earnings on November 7, 2019 for fiscal Q4 2019 (Disney's fiscal year ends September 30th).

Over the past 12 months, Disney stock has roughly matched the performance of the S&P 500. Although its stock lagged early in 2019, a significant spike before the company's quarterly earnings report in May has helped to propel Disney slightly ahead of the market. Analysts expect Disney to report earnings per share (EPS) of $0.77 on revenue of $19 billion, reflecting a sharp decline in earnings and jump in revenue relative to fiscal Q4 2018.

One Year Total Return for S&P 500 and Disney
Source: TradingView.

On a year-over-year basis, Disney has seen steady growth in both EPS and revenue from fiscal Q4 2017 to fiscal Q4 2018. Quarter-to-quarter, the performance in recent quarters has been significantly more turbulent, with a major spike in EPS on slightly declining revenue in fiscal Q2 of 2019. In the most recent quarter, a drop in EPS to $0.97 marked a downside surprise of more than 33%, even as revenue recovered on a sequential basis.

Disney Key Metrics
  Estimate for fiscal Q4 2019 Fiscal Q4 2018 Fiscal Q4 2017
Earnings per share (in dollars) 0.77 1.55 1.13
Revenue (in billions of dollars) 19.0 14.3 12.8
Media networks revenue (in billions of dollars) N/A 5.9 5.5
Source: YCharts and Disney

For Disney, "Media Networks" revenue includes all revenue from television and cable channels. This is an important metric for the company at this point because it is especially vulnerable to change, particularly given the broad trend toward viewership decline in ESPN as a result of users cutting cable. With Disney+, the company hopes to be able to pick up the slack which has developed in its traditional television and cable services as a result of the growing popularity of streaming. While Disney+ won't launch until after the fiscal Q4 earnings are released, investors should still pay attention to this key metric. Overall, "Media Networks" has grown steadily on a year-over-year basis, from $5,465 million in fiscal Q4 2017 to $5,963 million a year later. In the most recent quarter, fiscal Q3 2019, the figure was notably higher at $6,713 million. Whether Disney can keep up this growth remains to be seen when Q4 figures become available.